Rebuttal Addendum: Assessment of Submissions of the California Parties

In light of my report "Competitive Bidding Behavior in Uniform Price Auction Markets" ("Competitive Bidding Behavior Report"), which is being separately filed in this proceeding, I have reviewed the testimony of Drs. Fox-Penner, Stern, Berry, and Reynolds on behalf of the California parties, and Mr. Hanser on behalf of Southern California Edison. Contrary to their assertions, taken as a whole, the economists’ data and analyses do not provide economic evidence that market prices in California were fundamentally distorted by anticompetitive behavior, an abuse of market power, manipulative behavior, or collusion. The prices that prevailed in California during the time period between May 2000 and December 2001—while often higher than historical and forecast prices—were nevertheless market prices: they were determined by the competitive, independent, profit-maximizing decisions of many different firms, based on the market rules in place at the time. The actions of these firms are consistent with economic expectations of independent, competitive behavior in actual, "workably competitive" markets. The California Parties’ economists have used an inappropriate theoretical norm of perfectly competitive markets as a basis for assessing the observed outcomes, and as a basis for estimating the generators’ retroactive refund obligations. As a consequence, there is no reasonable economic basis for their conclusions, both with respect to the generators’ behavior and the calculation of refunds.